Best PracticeBy Mel Duval | Posted 2007-06-12 Print
From its embrace of ITIL, its clever balance between centralized and decentralized IT, and its rigorous management training, General Electric's tech team follows best practices. It's won a number of IT awards. And it's helped GE grow into a $163 billion b#4: CIOs As Change Agents">
Best Practice #4: CIOs As Change Agents
The business unit CIOs, because of their relative freedom from daily I.T. operations, tend to focus their attentions on using technology and Six Sigma in combination to improve their businesses. For example, GE Real Estate CIO Zupnick is always in the hunt for ways to boost efficiencies and magnify business opportunities by trimming unnecessary steps in a process.
"One of my people may be involved in a Six Sigma event process, or a Six Sigma black belt in the company will come to us and seek our help in reducing the work steps in a process," Zupnick explains. "This is when we identify opportunities to eliminate, say, four steps at once, or we use a new screen to handle or store data that is done manually now." He calls these "lean events."
Zupnick sees his role as the CIO of a GE division as a business driver, helping the general manager find ways to use I.T. to streamline processes and foster growth by enabling the unit to move more quickly to seize business opportunities. "Five weeks ago, I was in Paris with a group of our property management people who were trying to reduce the steps in the tenant process," he says. In this case, the "tenant process" includes a variety of steps property managers take to qualify and retain high-quality tenants in the real estate developments they manage.
"We helped them realize that they could be more effective by focusing not on every single tenant equally, but instead by focusing on only the most desirable ones whose leases were expiring." The property managers' time was put to more effective use concentrating on the best tenants. "We want to identify ways to get them to stay on with us," Zupnick adds.
At GE, CIOs are expected to take the initiative, bringing business-growth projects to bear whenever possible. In this instance, Zupnick and his team devised a system that provides metrics on the tenants. "It has a number of flags, [such as] sending off e-mails and followups alerting property managers when the most desirable tenants have leases that are coming up for renewal."
Zupnick says the impetus for the custom business systems his department builds often comes from his own staff 's initiative. In one example, the I.T. group came up with an idea to use technology to give the sales team more information on properties under consideration for investment. "We have been working for a number of years with a company called MapInfo in Troy, N.Y., on special mapping. We developed and integrated mapping with our loan portfolio. This enables our salespeople to see what other deals we have in, say, Walnut Creek, Calif. It also helps them understand the other issues in the area, things like the crime rate, growth projections, and mass-transit access to the site, which is very important."
According to Zupnick, his department turned the application into an internal GE product called Market at a Glance. A salesperson might have 50 deals under consideration, but have only five or six under close watch. "Market at a Glance helps them focus on that one deal and its area and see, for instance, if four out of five other deals we have in that area are outperforming the market, or maybe only two out of six are outperforming the market," he says. In other words, the system allows the sales staff to immediately compare the chances of a deal outperforming the market-or conversely, doing more poorly than other deals in the area—based on its location.
"The businesspeople might have come to that idea five years from now," Zupnick admits. "But my I.T. people, with their knowledge of spatial mapping, brought that idea forward and said, 'Let's go for it.'"
Whither I.T. In a GE Breakup?
In response to the stock's sluggishness and the perception that the company is hindered by slow growth, CEO Immelt continues to push GE into faster-growing businesses such as health care and aerospace, while shedding older industrial lines such as plastics that have put a drag on financial performance. Between 2003 and 2006, GE acquired businesses worth $80 billion and sold off units worth $35 billion. But those moves may be too little, too late for GE shareholders.
Regardless, one big question remains: How would GE's I.T. operations fare if the company's half-dozen business units—and possibly even some of its larger operating divisions within those units—were spun off to stand on their own, or sold to other companies or investment groups?
"I think that GE's I.T. would fare well, especially versus the average company's I.T., because of the GE mind-set," says Hackett Group's Holland. "They are all accustomed to have the same kinds of control structures in place, and if put on their own, they would go out and create almost the mirror images of what they had with the mother ship."
The loss of certain efficiencies enabled through shared services, though, would be an added cost that the various spun-off businesses would have to absorb. "If they were operating as independent, separate business units, there would be a huge cost associated with that because of the synergies they had been leveraging under GE," Holland observes.
In the meantime, breakup or no, GE's I.T. strategy—embracing Lean Six Sigma, a centralized/decentralized management structure and a progressive corporate training regimen for CIOs that is second to none—stands alongside its stellar record of profitability as a gold standard for I.T. management practices.
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